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EXHIBIT 10.23
CENCOM CABLE ENTERTAINMENT, INC.
FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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CENCOM CABLE ENTERTAINMENT, INC.
BALANCE SHEETS
March 31 December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS
INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP $104,693,830 $108,478,907
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$104,693,830 $108,478,907
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LIABILITIES AND SHAREHOLDER'S INVESTMENT (DEFICIT)
NOTES PAYABLE $ 82,000,000 $ 82,000,000
ACCRUED INTEREST ON NOTES PAYABLE 40,784,293 36,919,412
DEFERRED INCOME TAXES 55,500,000 55,500,000
SHAREHOLDER'S INVESTMENT (DEFICIT):
Common stock, $1 par value, 300,000 shares authorized; 245,973 shares issued
and outstanding 245,973 245,973
Additional paid-in capital 21,954,139 21,954,139
Accumulated deficit (95,790,575) (88,140,617)
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Total shareholder's investment (deficit) (73,590,463) (65,940,505)
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$104,693,830 $108,478,907
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The accompanying notes are an integral part of these balance sheets.
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CENCOM CABLE ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
---- ----
EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNERSHIP $(3,785,077) $(2,906,593)
INTEREST EXPENSE (3,864,881) (3,407,508)
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Net loss $(7,649,958) $(6,314,101)
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The accompanying notes are an integral part of these statements.
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CENCOM CABLE ENTERTAINMENT, INC.
STATEMENT OF SHAREHOLDER'S INVESTMENT (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
----- ------- ------- -----
BALANCE, December 31, 1997 $245,973 $21,954,139 $(88,140,617) $(65,940,505)
Net loss -- -- (7,649,958) (7,649,958)
-------- ----------- ------------ ------------
BALANCE, March 31, 1998 $245,973 $21,954,139 $(95,790,575) $(73,590,463)
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The accompanying notes are an integral part of these statements.
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CENCOM CABLE ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,649,958) $(6,314,101)
Adjustments to reconcile net loss to net cash provided by operating activities-
Equity in loss of unconsolidated limited partnerships 3,785,077 2,906,593
Changes in assets and liabilities-
Accrued interest on note payable 3,864,881 3,407,508
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Net cash provided by operating activities -- --
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CASH FLOWS FROM INVESTING ACTIVITIES: -- --
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CASH FLOWS FROM FINANCING ACTIVITIES: -- --
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CASH, beginning and end of period $ -- $ --
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CASH PAID FOR INTEREST $ $
-- --
=========== ===========
CASH PAID FOR TAXES $ -- $ --
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The accompanying notes are an integral part of these statements.
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CENCOM CABLE ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Cencom Cable Entertainment, Inc. (CCE), a Delaware corporation, is a wholly
owned subsidiary of CCA Acquisition Corp. (CAC). CAC is a wholly owned
subsidiary of CCA Holdings Corp. (CCA Holdings). CCA Holdings is owned
approximately 85% by Kelso Investment Associated V, L.P., an investment fund,
together with an affiliate (collectively referred to as "Kelso" herein) and
certain other individuals, and approximately 15% by Charter Communications, Inc.
("Charter"), manager of Charter Communications Entertainment I, L.P.'s (CCE-I)
and Charter Communications Entertainment II, L.P.'s (CCE-II) cable television
systems.
In January 1995, CAC completed certain acquisitions, including stock and asset
acquisitions of CCE and cable television systems located in Connecticut from
Crown Media, Inc., a subsidiary of Hallmark Cards, Incorporated (the "Crown
Transaction"). CCE's assets were comprised primarily of cable television systems
serving communities in St. Louis County, Missouri (the "Missouri System"). On
September 29, 1995, CAC and CCT Holdings Corp. (CCT Holdings), an entity
affiliated with CCA Holdings by common ownership, entered into an Asset Exchange
Agreement whereby CAC exchanged a 1% undivided interest in all of its assets
(including CCE's assets) for a 1.22% undivided interest in certain assets to be
acquired by CCT Holdings from an affiliate of Gaylord Entertainment Company,
Inc. (Gaylord). In September 1995, CCT Holdings acquired certain cable
television systems from Gaylord. Upon execution of the Asset Purchase Agreement,
CAC and CCT Holdings entered into a series of agreements to contribute their
assets to Charter Communications Entertainment, L.P. (CCE, L.P.). CCE, L.P.
immediately contributed the assets acquired under the Crown Transaction to CCE-I
and certain assets acquired in the Gaylord acquisition to CCE-II.
The series of transactions representing the contribution of assets to CCE-I
acquired under the Crown Transaction is a reorganization of entities under
common control and has been accounted for in a manner similar to a pooling of
interests. Accordingly, CCE-I's financial statements reflect the activity of
these systems for the entire year.
As a result of these transactions, CCE owns a 33% limited partnership interest
in CCE, L.P., CAC owns a 21% limited partnership in CCE, L.P. and CCT Holdings
owns a 44% limited partnership interest in CCE, L.P. In addition, CAC and CCT
Holdings each own a 1% general partnership interest in CCE, L.P.
The accompanying unaudited financial statements of CCE have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The financial statements are unaudited; however, in the opinion of management,
such statements include all adjustments necessary for a fair presentation of the
financial position and results of operations for the periods presented. These
financial statements should be read in conjunction with the financial statements
and notes thereto as of and for the year ended December 31, 1997. Interim
results are not necessarily indicative of results for a full year.
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3. LITIGATION:
CCE-I is a named defendant in a purported class action lawsuit (the "Action")
filed in October 1995 on behalf of the Cencom Cable Income Partners, L.P. (CCIP)
limited partners. The Action named as defendants the general partner of CCIP,
the purchasers of all the systems previously owned by CCIP (which includes CCE-I
and certain other entities managed by Charter), Charter and certain individuals,
including the directors and executive officers of the general partner of CCIP.
On February 15, 1996, all of the plaintiff's claims for injunctive relief were
dismissed (including that which sought to prevent the consummation of the CCIP
Acquisition); the plaintiff's claims for money damages which may have resulted
from the CCIP Acquisition remain pending. Based upon, among other things, the
advice of counsel, each of the defendants in the Action believe the Action to be
without merit and is contesting it vigorously. In October 1996, the plaintiff
filed a Consolidated Amended Class Action Complaint (the "Amended Complaint").
The general partner of CCIP believed that portions of the Amended Complaint are
legally inadequate and in January 1997, filed a dispositive motion as to all
remaining claims in the Action. In October 1997, the court granted in part, and
denied in part, defendants motion for summary judgment, the effect of which
narrowed the remaining issues significantly. The plaintiffs filed a motion to
alter or amend the court order. There can be no assurance, however, that the
plaintiff will not be awarded damages in connection with the Action, some or all
of which may be payable by CCE-I.
CCE is a named defendant in two actions involving Cencom Cable Income Partners
II, L.P. (CCIP II), a public limited partnership. In April 1997, a petition was
filed, and two amended petitions subsequently filed, by plaintiffs who are
limited partners of CCIP II against Cencom Properties II, Inc., the general
partner of CCIP II, Cencom Partners, Inc., the general partner of Cencom
Partners, L.P. (CPLP), an entity in which CCIP II invested, certain named
brokerage firms involved in the original sale of the limited partnership units
and CCE. CCE provided management services to both CCIP II and CPLP and also
owned all of the stock of the general partners of each of these partnerships
prior to mid-1994. The plaintiffs allege that the defendants breached fiduciary
duties and the terms of the CCIP II partnership agreement in connection with the
investment in CPLP, the management of certain CCIP II assets and the sale of
certain CCIP II assets. By an agreement between the parties, the brokerage
defendants and fraud allegations were dismissed without prejudice. The
plaintiffs seek recovery of the consideration paid for their partnership units,
restitution of all profits received by the defendants in connection with the
CCIP II transaction and punitive damages. In June 1997, a purported class action
was filed on behalf of the partners of CCIP II against Cencom Properties II,
CCE, Charter, certain other entities managed by Charter and certain individuals,
including officers of Charter or Cencom Properties II. The plaintiffs allege
that the defendants breached fiduciary duties and the terms of the CCIP II
partnership agreement in connection with the investment in CPLP, the management
of certain CCIP II assets and the sale of certain CCIP II assets. In November
1997, the plaintiffs amended their complaint to restate their allegations as a
shareholders' derivative claim. The damages claimed by the plaintiffs are as yet
unspecified. CCE believes that it has meritorious defenses in both actions and
intends to defend the actions vigorously. CCE is not able at this stage to
project the expenses which will be associated with the actions or to predict any
potential outcome or financial impact.
In October 1997, a purported class action was filed under the name Gerald
Ortbals v. Charter Communications, on behalf of all persons residing in Missouri
who are or were residential subscribers of CCE-I cable television service, and
who have been charged a processing fee for delinquent payment of their cable
bill. The action challenges the legality of CCE-I's processing fee and seeks
declaratory judgment, injunctive relief and unspecified damages. CCE-I believes
the lawsuit to be without merit and intends to defend the action vigorously.
CCE-I is not able, at this early stage, to project the expenses which will be
associated with this action or to predict any potential outcome or financial
impact.
The Company is also a party to lawsuits which are generally incidental to its
business. In the opinion of management, after consulting with legal counsel, the
outcome of these lawsuits will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
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